PETALING JAYA: The replenishment of Malaysia Marine and Heavy Engineering Holdings Bhd's (MMHE) order book has become uncertain as the project operators of the Malikai deepwater field are contemplating whether to maintain it as the preferred fabricator.

It is learnt that Shell and other partners of Malikai, namely Petronas Carigali and Conoco Phillips, have yet to make a decision on the issue.

Apparently, the initial bids for the design and fabrication of the Tension Leg Platform (TLP) for the Malikai project submitted earlier this year had exceeded the budget.

“As such, the project is now in re-bid phase. Bidders were reportedly unhappy with the amount of contractual protection afforded to MMHE while foreign companies would have to carry most of the contract risk,” said ECM Libra Investment Research yesterday.

“While it is still unclear what decision Shell intends to make on the contract, we view a need to be cautious on earnings going into next year as there may be some lumpiness as new jobs may see delays or in the worst case, order book could shrink,” it said.

The initial bids for the design and fabrication of the Tension Leg Platform for the Malikai project submitted earlier this year have exceeded budget

The TLP would provide order book replenishment amounting to an estimated RM4bil to RM5bil in 2012, it added.

“The Gemusut Kakap project's outstanding order book as at end March was RM716.5mil and completion was expected in first quarter of 2012.

“The Malikai TLP project was meant to replace that job,” said ECM Libra.

AmReaseach analyst Alex Goh told StarBiz that it was only a question of delay of the TLP award.

“Given MMHE's strategic importance as Malaysia's sole deepwater yard and Petronas' local content requirements, we remain positive MMHE will eventually secure the TLP contract for the Malikai deepwater project despite reports of a re-bidding process for the floating production system.

“The TLP which includes the 11,000 tonne topsides, 12,000-tonne hull and 34 slots will be the first such platform in Malaysia,” he said.

Both research houses did not mention any timeline for the delay of contract award of the Malikai project as neither Shell, Petronas nor MMHE had given any comments on Malikai.

Nevertheless, ECM Libra believed that the latest development was the result of some changes that were being implemented in Petronas by its CEO Datuk Shamsul Azhar Abbas.

“Shamsul had clearly stated that he wanted the group and therefore the industry to be competency based.

“This was further enforced with his plans to clean up the vendor development programme as many vendors were getting unfair advantage in jobs which he said could be proven,” said ECM Libra .

MMHE would have to tighten up its operations to stay in the game given the stance that Petronas had taken, it said.

MMHE has appointed Dominique de Soras as managing director and chief executive officer since Feb 1, replacing Wan Yusoff Wan Hamat.